2017 was a great year for the ecommerce industry in Vietnam. Among the biggest events were Alibaba’s US$1 billion investment in Lazada and JD.com’s US$44 million investment in Tiki.vn.
And early this year, Creador injected US$43.8 million into Vietnam’s largest electronics retailer Mobile World (The Gioi Di Dong). The omni-channel giant also succeeded in acquiring Tran Anh Digital earlier on.
The ecommerce market also showed positive growth over the past few months, with the revenue amounting to US$2.6 million so far this year. With an expected annual growth rate (CAGR between 2018 and 2022) of 13.7 percent, the market volume of Vietnamese ecommerce is predicted to hit US$4.3 million in 2022.
To find out the drivers behind this growth, we explored iPrice’s proprietary data of over 1,000 ecommerce players in the region. Our research uncovered the following highlights:
- Vietnam has the highest growth in mobile traffic in Southeast Asia
- Vietnam’s ecommerce merchants are leaders in conversion rate
- Bank transfer and COD are more popular payment methods
Highest mobile growth
Mobile traffic in Southeast Asia
At 26 percent over the past 12 months, Vietnam enjoyed the steepest growth in mobile traffic across Southeast Asia. Mobile traffic has grown by 19 percent on average, now accounting for 72 percent of the overall ecommerce traffic.
Millennials are the key driver for mobile growth in Vietnam. According to Nielsen, this generation makes up 30 percent of the country’s population, which translates to around 27 million people. A ComScore 2017 report recorded that Vietnam demonstrates a stronger mobile-first population than other global and regional markets due to millennials’ increasing use of mobile.
To illustrate, we saw the dramatic rise of Shopee in 2017. Within less than two years of operation, the mobile-first platform surpassed Lazada to become the number one shopping app in the country. This signifies that millennial shopping behavior is gradually shaping the future of ecommerce in Vietnam.
High conversion rate
Conversion rate per country
The average conversion rate in Vietnam is 30 percent higher than the Southeast Asian average. And at US$23, Vietnam’s basket size is lowest in the region, as people order low-value products without an intent to return the items.
According to a 2016 survey, there is a lack of unification in terms of cancellation policies in Vietnam, making it difficult for consumers to return products. Many cancellation policies come with extra conditions. Some merchants require membership in order to make a cancellation, and others only allow consumers to return products on their next purchase. These issues can only be addressed with better logistics and delivery service from merchants.
The popularity of online-to-offline model is another contributing factor in the rise of conversion rate in ecommerce in Vietnam. Consumers can examine the products in physical stores then make a purchase via a website or vice versa.
Bank transfer and COD’s popularity
Payment solutions offered by merchants
At 82 percent, Vietnam has the highest number of merchants offering COD. Up to 60 percent of merchants use self-delivery or hire shippers to handle COD payments instead of using third-party logistics. Merchants have to face several obstacles when using a third-party service, such as high operation costs, late deliveries, and slow transactions.
Vietnamese merchants are therefore offering more secure payment methods to consumers. Bank transfer, offered by 88 percent of merchants, is getting popular in the country. Offline point of sales and installment were also introduced to encourage shoppers make higher-value transactions.
Vietnam has the least number of merchants in Southeast Asia that offer credit card payment due to low banking penetration. In 2016, only 15 percent of bank card users made an online purchase. Still, up to 67 percent of merchants are willing to offer credit card payment.
Vietnam is also heading toward a cashless economy. In early 2017, the government introduced a cashless plan to reduce cash transactions to 10 percent of the total market transaction by 2020. Following the plan, cash payments will be subject to fees and credit card payments will come with discounts. This aims to encourage consumers to shop more online via non-cash transactions. An automatic payment center will also be established within the next three years to help connect consumers with online payment facilities.
Source: Ly Pham